Exchanges are popular but complex
By: Jennifer Haberkorn
November 16, 2010 04:38 AM EST
How could too many choices become a problem? Ask the Massachusetts officials who put together the country’s first insurance exchange.
Consumers “felt overwhelmed” when flooded by too many options for private insurance, said Rosemarie Day, president of Day Health Strategies and former deputy director and chief operating officer of the Commonwealth Health Insurance Connector Authority – the group that put together the exchange.
At some point, she said, too many choices of health insurance – already a complicated purchase – became no better than not enough choices.
As the federal government and states start to put together the building blocks of the health care overhaul’s insurance exchanges – Orbitz- or Expedia-like Web programs with which to buy insurance – they’re trying to avoid the hiccups experienced in the only two states with similar exchanges already in place today.
“Putting up these state-based exchanges is a challenge,” Joel Ario, the Department of Health and Human Services’ director of the Office of Health Insurance Exchanges, told insurers gathered at a meeting of America’s Health Insurance Plans in Chicago last week. “It’s going to take a partnership with the states and a partnership with the insurance industry.”
Ario’s goal with the exchanges, he said, is to have them work as well for the individual and small-group markets – people who buy coverage on their own or through a small business – as the employer-based system does for large-group coverage.
The program was set up to allow states to establish exchanges that are as stringent or as relaxed as they want. In general, states are expected to find a place along the spectrum, with Utah representing the most relaxed program and Massachusetts the most rigid.
Cheryl Smith, a director at Leavitt Partners and former director of the Utah Health Exchange Office, described Utah’s program as essentially a “farmers market,” where insurers can offer their plans as farmers offer their produce at a market, with few requirements to participate.
Massachusetts’s program is more complex; it has the authority to reject insurers’ premiums bids if it finds them to be too high, a feature that’s designed to leverage the buying power of the exchange.
States have to have a system established by 2013 or the federal government will step in and set up the program. The exchanges must be ready for consumers by 2014.
The insurance exchanges are one of the most innovative and complicated pieces of the health care overhaul. But they also enjoy broad bipartisan support relative to the rest of the controversial legislation.
Illinois Insurance Director Michael McRaith said that for all the talk on Capitol Hill of repealing health reform, he thinks the exchanges are here to stay.
“The exchanges, in my view, can be differentiated from other aspects of health reform. Health insurance reform is going to be very difficult to repeal. But exchanges, until this point, have been adopted in states that are Republican,” he told AHIP on Tuesday, pointing to Massachusetts, Utah and California.
California Gov. Arnold Schwarzenegger has been one of the most prominent Republicans to support reform, and his state was the first to enact legislation on an exchange, which has yet to be established.
State officials have raised a number of worries about the new exchanges, however. They say they don’t have enough time to set up the program by 2013 and worry about whether it will control costs, among other concerns. The exchanges will also have to work with the Medicaid program to determine whether customers are eligible. All of the new responsibility comes as state budgets and Medicaid funds are shrinking.
The health reform law allows states to join together to establish regional exchanges – which could be particularly helpful in small or sparsely populated states that don’t have a large enough pool to leverage anything out of an insurer.
But many of the exchange experts at AHIP’s meeting cautioned that it would be difficult to overcome political and logistical barriers among the states.
“I think regional states are a good idea,” Smith said. But “it gets very complicated to do this across state lines.”
HHS has already moved to ease some of the states’ concerns and prove that it’s going to be flexible when it can.
In response to worries that states don’t have the time, authority or knowledge to quickly design and implement the exchanges’ information technology program, the department recently announced potentially significant grants for five states willing to put together programs that other states can use as models.
Ario said HHS is hoping states can design programs that control costs – one of the things that many critics of the health law say it didn’t do.
“We have the opportunity now, through the use of the insurance exchanges, to really test some ideas out there about ways to reform the system,” Ario said.
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